Brown v. Freed

1

Nathanael Brown, Appellant v. Jessica Freed and Samuel Freed, Appellees

No. 03-21-00556-CV

Court of Appeals of Texas, Third District, Austin

August 1, 2023

FROM COUNTY COURT AT LAW NO. 2 OF TRAVIS COUNTY NO C-1-CV-19-009322, THE HONORABLE TODD WONG, JUDGE PRESIDING

Before Justices Baker, Theofanis, Jones ^[*]

MEMORANDUM OPINION

J Woodfin Jones, Justice

We withdraw our opinion and judgment dated May 10, 2023, and substitute the following in place of the earlier opinion. The motion for rehearing filed by appellant Nathanael Brown is overruled.

Jessica Freed and Samuel Freed sued their former landlords, Marc and Karen Greenberg, alleging that they had acted in bad faith in withholding a portion of their security deposit. See Tex. Prop. Code § 92.109 (liability of landlord for retaining security deposit). After the conclusion of a bench trial, but before the trial court signed a final judgment Brown (the Greenbergs' property manager) filed what he designated as a "motion for joinder . . . and new trial." After the trial court signed a final judgment in favor of the Freeds and denied Brown's motion, Brown filed a notice of appeal.

In nine issues, Brown challenges the trial court's judgment against the Greenbergs and the trial court's order denying his "motion for joinder . . . and new trial." We conclude that Brown has failed to demonstrate that he has standing under the virtual-representation doctrine to challenge the judgment against the Greenbergs and that the trial court did not abuse its discretion in denying his post-trial attempt to intervene. Accordingly, we dismiss this appeal in part and affirm the trial court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In December 2015, the Freeds entered into an agreement to lease residential property in Austin owned by the Greenbergs. As required by the lease, the Freeds paid $2,095 as a security deposit. Ironrock Properties, a property management company was the Greenbergs' corporate agent in negotiating the lease and in managing the property. Brown, a broker's associate with Ironrock, was the property manager during the lease.

In August 2018, the Freeds gave written notice to Ironrock that they did not intend to renew the lease when it expired on September 30, 2018. The Freeds also provided Ironrock with a forwarding address for the purpose of returning their security deposit. In response, Ironrock asked the Freeds to notify its staff if they decided to vacate the property earlier than September 30 so that the property manager could begin the "move out inspection and process [their] security deposit." On September 18, the Freeds vacated the property and provided written notice of the surrender, as requested. Forty-three days later, on October 30, Brown sent the Freeds a check in the amount of $514.62, representing a partial return of their security deposit, along with an itemization of charges taken against the withheld portion.

The Freeds later filed suit, alleging that the Greenbergs acted in bad faith in failing to return their full security deposit and in failing to timely return the deposit or provide an itemization of deductions.^[1] See id. §§ 92.103 (generally obligating landlord to refund security deposit to tenant within 30 days after tenant surrenders premises), 92.109(a), (b), (d) (liability of landlord who in bad faith retains security deposit or fails to provide an itemization of deductions; bad faith is presumed when landlord fails to return security deposit or provide itemization of deductions within 30 days after tenant surrenders possession). At the trial on the merits, conducted on August 10, 2021, the Greenbergs called Brown as their only fact witness. In part, Brown testified about his decision to deduct certain charges from the security deposit for what he asserted were damages to the property. See id. § 92.109(c) (landlord has burden of proving that retention of any portion of security deposit was reasonable). As to the Freeds' allegation that the itemization of deductions was untimely, Brown testified that he could not have provided the itemization earlier because he was waiting to receive the final utility bill for the property. At the conclusion of the trial, the court announced that it would take the case under advisement.

Two days later, on August 12, Brown filed a "motion for joinder of persons needed for just adjudication and new trial," effectively seeking to intervene in the suit.^[2] The Freeds responded by objecting in writing to Brown's attempt to intervene post-trial and moving the court to render a final judgment.^[3] On August 30, 2021, the court signed a final judgment awarding the Freeds $5,330.26 in actual damages and $15,199.00 in attorney's fees.

On October 11, 2021, the trial court conducted a hearing on Brown's "motion for joinder," at which Brown appeared and represented himself pro se. An order overruling Brown's motion was signed by the trial court on October 12 and filed on October 13.

Brown later filed a notice of appeal and raises nine issues in his appellant's brief. In four issues, he challenges the trial court's final judgment against the Greenbergs and, in two related issues, contends he has standing to bring this challenge even though he is not a party to the judgment. In the remaining three issues, Brown challenges the trial court's decision not to allow him to intervene.

DISCUSSION

Brown's Standing to Challenge the Judgment

As a preliminary matter, we first consider Brown's assertion that this Court has subject-matter jurisdiction to consider his challenges to the merits of the trial court's final judgment resolving the suit between the Freeds and the Greenbergs.

Standing is a component of subject-matter jurisdiction. State v Naylor, 466 S.W.3d 783, 787 (Tex. 2015). Generally, only parties of record have standing to appeal a trial court's judgment. In re Lumbermens Mut. Cas., 184 S.W.3d 718, 723 (Tex. 2006) (orig. proceeding); see Tex. R App. P. 25.1(c) (providing that "party who seeks to alter the trial court's judgment" must file notice of appeal). Here, Brown attempted to intervene in the Freeds' suit after trial but before the trial court signed the final judgment, but the court did not allow him to do so. Consequently, Brown is not a party of record to the judgment against the Greenbergs. See Kenneth D. Eichner, P.C. v. Dominguez, No. 14-18-00399-CV, 2022 WL 364070 at *7 (Tex. App.-Houston [14th Dist.] Feb. 8, 2022, pet. denied) (mem. op.) (concluding that appellant whose pre-judgment intervention was struck was not party to judgment it sought to appeal).

Although Brown was not a party of record after his intervention was struck, he asserts that he is nevertheless entitled to appeal the trial court's judgment under the equitable doctrine of virtual representation. See Naylor, 466 S.W.3d at 789 ("Although the right to appeal is generally limited to parties of record, a third party may file an appeal where the prospective appellant is 'deemed to be party' under the doctrine of virtual representation."). The virtual-representation doctrine provides an exception to the general rule that only parties of record may appeal. Id. To "intervene" on appeal as a deemed party under the virtual-representation doctrine, the nonparty must establish that (1) he is bound by the judgment; (2) he is in privity of estate, title, or interest with a party, which privity appears from the record; and (3) there is an identity of interest between him and a party to the judgment.^[4] In re Lumbermens, 184 S.W.3d at 722.

In determining whether a nonparty is a deemed party who may appeal by virtual representation, "the most important consideration is whether the appellant is bound by the judgment." City of San Benito v. Rio Grande Valley Gas Co., 109 S.W.3d 750, 755 (Tex. 2003).

Brown contends he is bound by the judgment in this case because, as the Greenbergs' agent in the transactions that are the subject of the Freeds' suit, he is potentially liable to the Greenbergs to the extent they were found liable to the Freeds. Brown's argument is that the Greenbergs may later sue him and Ironrock for negligence, breach of fiduciary duty, and violations of the Texas Real Estate Licensing Act, and that as a consequence of the judgment in this case he would be precluded from asserting that his actions in returning the Freeds' security deposit complied with terms of the lease and with Chapter 92 of the Property Code.

Brown's argument that he is or could be bound by the judgment below implicates the doctrine of collateral estoppel, also known as issue preclusion. The doctrine prevents the re-litigation of particular issues already resolved in a prior suit, Barr v. Resolution Tr. Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627, 628 (Tex. 1992), and is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments, Sysco Food Servs. v. Trapnell, 890 S.W.2d 796, 801 (Tex. 1994). To invoke collateral estoppel, a party must establish that "(1) the facts sought to be litigated in the second action were fully and fairly litigated in a first action, (2) those facts were essential to the judgment in the first action, and (3) the parties were cast as adversaries in the first action." In re USAA Gen. Indem. Co., 629 S.W.3d 878, 883 (Tex. 2021) (quoting Sysco Food Servs., 890 S.W.2d at 801).

For two independent reasons, we conclude that Brown has not established that he would, in a hypothetical future suit brought against him by the Greenbergs, be bound by the judgment in this case.

(1) Brown and the Greenbergs were not "cast as adversaries" in this suit.

As noted above, one of the essential elements for the use of collateral estoppel is that the party seeking to...